Oracle showsstrong third quarter on cloud strength

INTERNATIONAL – Oracle on Monday forecast current-quarter profit above estimates after growth in its cloud services and license support unit helped the business software maker surpass Wall Street expectations for the second quarter.

Shares rose 5 percent, with the company saying that excluding fluctuations in exchange rates, it expected third-quarter adjusted profit to be between 86 cents and 88 cents per share.

Analysts on average were expecting 84 cents, according to IBES data from Refinitiv.

Revenue at its cloud services and license support unit, its biggest, rose 2.7 percent to $6.64 billion (R94bn) and beat analysts’ estimate, as more companies shifted to cloud computing from the traditional on-premise database model to cut costs.

Oracle’s in June created a new revenue reporting structure that merged its cloud and software license businesses, which analysts have said gives little insight into the standalone performance of its cloud unit.

Oracle is a late entrant to the rapidly growing cloud-based software business but has aggressively stepped up its efforts to catch up with rivals such as Workday, Microsoft and Salesforce.com.

“Oracle’s growth in cloud services and license support of just 3 percent appears to be contradicting the strength in the overall cloud market,” said Daniel Morgan, senior portfolio manager of Synovus Trust Co, which hold 152,500 shares in the company.

“Oracle is still dragging behind other old-line enterprise software players like Microsoft in its transition to becoming a top cloud company,” said Morgan, whose firm also hold shares in Salesforce and Microsoft Corp.

The company’s net income rose to $2.33 billion, or 61 cents per share, in the second quarter ended Nov. 30. Excluding items, the company earned 80 cents per share, beating the average analyst estimate of 78 cents.